U.S. CPI Rises 3.4% YoY While Long-Term Yields Surge Amid Fiscal Deficits

July U.S. CPI hit 3.4% YoY, lowering Fed hike odds to 40%. However, $1.8T deficit and rising debt keep long-term yields high, pressuring leveraged assets.

Woofun AI reports that U.S. CPI increased 0.1% monthly and 3.4% annually in July, with core CPI up 2.5% year-on-year. Market expectations for a September Federal Reserve rate hike fell from 50% to 40%, easing short-term policy pressure.

However, the U.S. fiscal deficit approached $1.8 trillion in the first 10 months, and national debt neared $40 trillion. Consequently, 10-year Treasury yields reached levels unseen since 2007, while 30-year yields approached 5.25%, indicating that long-term funding costs remain elevated due to fiscal deficits and inflation risks.

In Asia, the yen approached the 160 mark as Japan's PPI rose 7.2% annually, raising expectations of a BOJ rate hike. Gold gained support from reduced rate hike risks and a weaker dollar, though its rally is driven by interest rate expectations rather than simple cut hopes.

Meanwhile, Russia-Ukraine conflict disruptions to Black Sea ports threaten energy and food supplies, potentially complicating inflation risks. For Bitcoin, attention should focus on U.S. dollar liquidity and long-term Treasury yields rather than just Federal Reserve policy rates.